The Marijuana Market in Canada Continues to Expand Ahead of Legalization

canada marijuana market expansion
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Canadian Marijuana Market

As we near the Canadian marijuana legalization date of October 17, one of the hottest trends among pot stocks is nailing down supply agreements with provincial governments.

Since marijuana will largely be regulated on the provincial level, signing deals with provincial governments is a surefire way to keep marijuana sales stable as the Canadian marijuana market opens up.

The latest news sees Ontario, the most populous and richest of Canada’s provinces, opening its market to even more suppliers. (Source: “Ontario Cannabis Store increases number of licensed suppliers to 32,” CTV News, September 5, 2018.)

This announcement came after the province already announced that it had signed deals with some of the industry’s heaviest hitters, including Canopy Growth Corp (NYSE:CGC), Aurora Cannabis Inc (OTCMKTS:ACBFF, TSE:ACB), and Cronos Group Inc (NASDAQ:CRON).

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Ontario is especially notable among its peers because it recently switched from a publicly-run provincial monopoly on marijuana sales to a private-sector model, which will allow companies to open up marijuana storefronts across the province.

While the last-minute changeover—a result of a switch in government in the summer—will see these storefronts delayed until April 2019, the upshot is that it will be far more business-friendly compared to a public model.

This means that marijuana companies now have far more opportunities to compete in Ontario than they had before.

Now that the provincial government is adding more suppliers to the pool, it’s going to be a win-win for everyone involved. Consumers will see competition grow and drive prices down while also creating product innovation, while marijuana companies will have the ability to create and personalize their brands via marijuana storefronts.

Overall, this is great news for the legal cannabis industry and once again it shows why marijuana bulls ought to be counting down the days until Canada’s October 17 legalization.

Analyst Take

As the Canadian marijuana market continues to expand, we’re going to see cannabis companies vie for lucrative supply agreements that will see steady sales to provinces for potentially years to come.

That makes nabbing one of these agreements a top priority for marijuana companies. Tilray Inc (NASDAQ:TLRY) is a perfect example of a pot company that has benefited greatly from signing multiple supply agreements, although there are other factors at play with that specific company.

In any case, the two major drivers of marijuana stocks right now are supply agreements and Big Alcohol deals, making the marijuana expansion in Ontario great news for pot stock investors.